Pakistan to sniff out tax evaders

Islamabad

THREE million of Pakistan's richest income tax evaders will get 90 days to take up a government amnesty offer after which they will be hounded by inspectors under an ambitious plan to improve the country's finances.

The cabinet has approved an amnesty proposal targeting 3.1 million people officials identified as having avoided paying income tax in a country that's among the 15 lowest revenue-gathering nations in the world.

Under the plan, each will be able to pay a one-time 40,000 rupee ($A393) penalty on undeclared income and assets of up to 4 million rupees, according to Asrar Raouf, a senior official at Pakistan's tax collection body, the Federal Board of Revenue.

''This is our most drastic step to widen the tax net,'' Mr Raouf said. ''We will go after these tax evaders if they don't respond, and cripple their lives.''

The government says the proposals will help Pakistan repair its finances after recording the highest budget deficit in two decades in the year to June 30 as it missed its tax collection target and international assistance plunged. Critics, including rival politicians and former advisers to the finance ministry, say the primary aim is to protect the illegally stashed wealth of government supporters.

''This is our effort to bring the hidden wealth into the tax net,'' said Farhatullah Babar, spokesman for Pakistani President Asif Ali Zardari.

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''The government is giving this opportunity to tax evaders before launching a meaningful crackdown.''

Pakistan had to repay about $US7.5 billion to the International Monetary Fund by 2015, $US1.2 billion of which it had handed over by June, Moody's Investors Service said in July, when it cut Pakistan's credit rating deeper into junk status on falling reserves and political instability.

Only 856,000 people pay income tax in the country of about 200 million people.

The IMF said the amnesty would discourage honest taxpayers from continuing to pay up and was a short-term solution to much deeper problems, such as the chronic bribing of tax department officials to look the other way. BLOOMBERG